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Nu-World - Reviewed Interim Report For The Half Year Ended 28 February 2005
NU-WORLD HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 1968/002490/06)
Share Code: NWL ISIN code: ZAE000005070
("Nu-World" or "the company")
REVIEWED INTERIM REPORT FOR THE HALF YEAR ENDED 28 FEBRUARY 2005
- Group Turnover up 14.7% to R911.6m
- EBITDA up 22.8% to R56.2m
- Attributable Income up 35.5% to R35.4m
- Headline Earnings per share (cents) up 34.3% to 163.8 cents
- Cash generated by operations R66 444 million
5 Year Compounded Average Annual Growth Rate in Headline Earnings - up 26.1%
Fifteen consecutive years of Growth in Turnover, Operating Income, Attributable
Income, Headline Earnings per Share
CONSOLIDATED INCOME STATEMENT Reviewed Reviewed Audited
six months six months Year
ended ended Ended
28 Feb 2005 29 Feb 2004 % Change 31 Aug 2004
R"000 R"000 R"000
Turnover 911 616 794 483 14.7 1 430 804
Net operating income 56 181 45 737 22.8 94 661
Depreciation 3 979 4 145 8 443
Interest paid 3 822 4 048 3 605
Income before taxation 48 380 37 544 28.9 82 613
Taxation 10 699 8 196 19 082
Income after taxation 37 681 29 348 28.4 63 531
Minority interests 2 312 3 252 (28.9) 2 781
Attributable income 35 369 26 096 35.5 60 750
Dividend declared 15 252
Dividend per share (cents) 70.3
Headline earnings 35 369 26 327 34.3 60 610
Earnings per share (cents) 163.8 120.8 35.5 281.3
Headline earnings per share 163.8 121.9 34.3 280.6
(cents)
Dividend declared cover 4.0
Interest cover 13.7 10.3 23.9
Shares in issue 21 597 265 21 597 265 0.0 21 597 265
Shares in issue - weighted 21 597 265 21 597 265 0.0 21 597 265
CONSOLIDATED CASH FLOW STATEMENT
Reviewed Reviewed Audited
six months six months year
ended ended ended
28 Feb 2005 29 Feb 2004 31 Aug 2004
R"000 R"000 R"000
Cash generated by operating 66 444 20 658 72 119
activities
Cash generated by operations 95 584 41 635 98 241
Interest paid (3 822) (4 048) (3 606)
Dividend paid (15 252) (8 675) (8 675)
Normal tax on companies (10 066) (8 254) (13 841)
Cash flows from investing (23 357) (11 950) (13 859)
activities
Purchase of tangible fixed (2 929) (1 949) (4 039)
assets
Proceeds on disposal of 462
fixed assets
Increase in investment in (20 428) (10 001) (10 001)
subsidiaries
Increase in investment in (281)
treasury shares
Cash flows from financing (2 669) - -
activities
Repayment of long-term (2 669)
borrowings
Net increase in cash and 40 418 8 706 58 260
cash equivalents
Effect of exchange rate (9)
changes
Cash and cash equivalents at 161 688 103 437 103 437
the beginning of the year
Cash and cash equivalents at 202 106 112 145 161 688
the end of the period/year
CONSOLIDATED BALANCE SHEET
Reviewed Reviewed Audited
six months six months year
ended ended ended
28 Feb 2005 29 Feb 2004 31 Aug 2004
R"000 R"000 R"000
ASSETS
Non-current assets
Fixed assets 46 559 49 603 46 997
Goodwill 17 633 5 555 5 926
Current assets
Inventory 214 467 162 030 167 447
Trade and other receivables 215 622 228 734 217 528
Cash equivalents 202 106 112 145 161 688
Total assets 696 387 558 067 599 586
EQUITY AND LIABILITIES
Ordinary shareholders" funds 383 633 328 957 361 398
Minority interests 33 401 26 416 23 785
Total shareholders" funds 417 034 355 373 385 183
Non-current liabilities 9 692 9 688 4 443
Current liabilities
Trade and other payables 269 661 193 006 209 960
Total equity and liabilities 696 387 558 067 599 586
SUPPLEMENTARY INFORMATION
Reviewed Reviewed Audited
six months six months year
ended ended ended
28 Feb 2005 29 Feb 2004 % Change 31 Aug 2004
R"000 R"000 R"000
Determination of attributable
earnings and headline
earnings
Net income attributable to 35 369 26 096 35.5 60 750
ordinary shareholders
Adjustment for amortisation 231 (140)
of goodwill
Headline earnings 35 369 26 327 34.3 60 610
Operating income as 6.2 5.8 6.6
percentage of turnover (%)
Net negative debt to equity (52.7) (34.1) (44.7)
ratio (%)
Effective taxation rate (%) 22.5 21.8 23.1
Net asset value per share 1 776.3 1 523.1 16.6 1 673.4
(cents)
Capital Expenditure
Expansion 1 200 1 249 3 363
Replacement 1 729 700 676
2 929 1 949 4 039
Goodwill and amortisation
At beginning of year 5 926 5 786 5 786
Acquisition of subsidiaries 9 295
Derecognition of negative 2 412
goodwill in terms of IFRS 3
Goodwill amortised (231) 140
At end of period/year 17 633 5 555 5 926
Accounting policies
The consolidated abridged financial statements for the period ended 28 February
2005 are prepared in accordance with the South African Statements of Generally
Accepted Accounting Practice ("SA GAAP") applicable to financial reporting
(AC127). The accounting policies used are consistent in all material respects
with those used in the annual financial statements for the year ended 31 August
2004. The Group adopted International Financial Reporting Standard IFRS 3,
accounting for business combinations, resulting in goodwill no longer being
amortised and negative goodwill at R2,4 million being taken to reserves.
These results have been reviewed by Tuffias Sandberg KSi and their unqualified
review report is available for inspection at the company"s registered office.
STATEMENT OF CHANGES IN EQUITY
Foreign
currency
Share Share Treasury translation
capital premium shares reserve
R"000 R"000 R"000 R"000
Balance as at 1 September 2003 217 115 632 (791) (1 291)
Net profit for the year
Dividends
Dividend settled
Fair value movement 478
Net treasury movement (281)
Balance as at 31 August 2004 217 115 632 (1 072) (813)
Net profit for the period
Derecognition of negative
goodwill (IFRS 3)
Dividends
Dividend settled
Fair value movement (294)
Balance as at 28 February 2005 217 115 632 (1 072) (1 107)
Shareholders
Accumulated for
profits dividend Total
R"000 R"000 R"000
Balance as at 1 September 2003 195 305 309 072
Net profit for the year 60 750 60 750
Dividends (8 621) 8 621 -
Dividend settled (8 621) (8 621)
Fair value movement 478
Net treasury movement (281)
Balance as at 31 August 2004 247 434 - 361 398
Net profit for the period 35 369 35 369
Derecognition of negative 2 412 2 412
goodwill (IFRS 3)
Dividends (15 252) 15 252 -
Dividend settled (15 252) (15 252)
Fair value movement (294)
Balance as at 28 February 2005 269 963 - 383 633
COMMENTS
FINANCIAL REVIEW
Directors of Nu-World Holdings Ltd, a leading supplier of branded consumer
durables to the retail industry, are pleased to report excellent growth for the
period ending 28 February 2005. The Group is on track for fifteen consecutive
years of growth in turnover, operating income, attributable income and headline
earnings per share.
The buoyant conditions in the South African retail industry evident during the
previous financial year, have remained in place for the period under review.
Group turnover increased by 14,7% to R911,616m (February 2004 : R794,483m.)
The strength of the Rand against the US Dollar, resulted in price deflation in
Consumer Electronics averaging 18% - 20%, whilst price deflation of other Nu-
World consumer durable ranges, averaged 10% - 12%.
All foreign subsidiaries traded profitably during the period under review. The
contribution from offshore subsidiaries in Australia and the UK, decreased in
the period under review, due to the difficult economic trading conditions
currently being experienced in these markets. These two markets are not as
buoyant as the South African consumer market at this time. These difficult
trading conditions are expected to continue for the remainder of the financial
year, improving possibly during the last quarter of 2005.
Net operating income, EBITDA increased 22,8% to R56,181m (February 2004:
R45,737m). Operating margins increased to 6,2% as compared to the previous
year"s 5,8%.
The improved working capital position has resulted in a 5,6% reduction in
interest paid of R3,822m (February 2004: R4,048m). Overall net working capital
days of 83.7 days compares favourably with the previous period"s 87.7 days.
Interest cover improved from 10.3 to 13.7 times. In addition, the working
capital improvement was as a result of the increased stock levels being funded
by suppliers, as well as improved debtors collections.
Attributable income increased by 35,5% to R35,369m (February 2004: R26,096m).
Headline earnings per share - H.E.P.S. increased 34,3% to 163.8 cents (February
2004: 121.9 cents).
Cash generated by operating activities amounted to R66,444m.
The balance sheet remains solid and the group remains ungeared with cash
balances on hand of R202,106m (February 2004: R112,145m).
The increase in goodwill to R17,633m (February 2004: R5,555m) is as a result of
the derecognition of negative goodwill amounting to R2,4m plus R9,3m, being the
goodwill arising from the acquisition of Yale Appliance Group.
The net asset value per share of 1,776 cents is up 16,6% (February 2004: 1,523
cents).
OPERATIONAL REVIEW
Electrical AppliancesNu-World is South Africa"s leading low-cost, high-volume
manufacturer, importer and exporter, of electrical appliances and one of South
Africa"s key players in consumer electronics.
Group revenue, from the import and manufacture of electrical appliances was
reasonable, despite price deflation averaging 10% to 12%. A number of new
products will be introduced during the second half of the financial year.
Consumer Electronics
JVC * Telefunken * Thomson * Nu-Tec * Palsonic Nu-World is one of the few
companies with brands included in leading top 10 brand surveys. Notwithstanding
price deflation of up to 20% in consumer electronics, during the period under
review, the Nu-World brands performed relatively well.
Subsidiaries
Nu-World U.K. LtdPrima Australasia Pty LtdYale Appliance Group Pty LtdAkai *
Telefunken * Prima Electronics * Nu-Tec * RCA * Thomson
Nu-World U.K. Ltd is a 60% held subsidiary, established on 1st September 2003.
Nu-World U.K. Ltd imports and distributes a range of branded consumer durables
with a primary focus on small electrical appliances. Notwithstanding the
difficult trading conditions in the U.K. at this time, the company traded
profitably during the period under review.
Nu-World holds a 51% share in Prima Australasia Pty Ltd. Prima has produced a
profitable contribution in an increasingly competitive and deflationary market,
achieving an increase in revenue of 5.6% in Australian dollar terms, year on
year.
Nu-World acquired a 65% shareholding in Yale Appliance Group Pty Ltd, effective
1st September 2004. Management intends to combine the logistics and operations
of Prima and Yale in Melbourne so as to reduce operating costs and overheads.
Yale"s operations and customer base are complimentary to those of Prima and it
is expected that both subsidiaries will benefit from the increased market
presence and shared operating and overhead structures.
NEW PRODUCT RANGE LINE-UP
Air-Conditioning
Nu-World successfully introduced a full range of air-conditioners exclusively
for sale through air-conditioning installers. The enlarged range includes mid-
wall splits, ducted units, ceiling cassettes, and convertible type air-
conditioners. The air-conditioning division continues to generate strong growth.
Conti Motorsport
Nu-World has launched a range of motorcycles to be sold to the mass market
through major retail outlets and furniture stores. This range includes scooters,
scramblers, and quad bikes. The concept is to provide consumers with an
opportunity to purchase these scooters / motorbikes for cash, or on hire
purchase agreements, through retail outlets. Commuters will be able to purchase
a vehicle and pay a monthly finance charge, in line with, or less than, their
increasing public transport costs. In addition, ownership offers unlimited
mobility and reduces commuting time. Scramblers and quad-bikes are targeted at
the recreational and youth markets, which are experiencing a popular demand
surge at this time.
Bicycles - Nu-World is also introducing a range of bicycles including mountain
bikes and BMX bikes.
White Goods * Large Appliances
The Telefunken range of white goods has been exceptionally well received in the
market and strong sales are expected throughout the remainder of the year. At
present the Nu-World large appliance offering includes a comprehensive range of
refrigerators, washing machines, dishwashers and stoves.
The department of minerals and energy has requested that energy efficiency
labeling on refrigerators be undertaken as a pilot project. This is to inform
consumers of the value of energy efficient appliances, in a market of increasing
electricity cost.
We have successfully introduced a specific group of niche General Electric, GE,
products, into selected retailers and independents. General Electric is a well-
respected brand in South Africa and we expect increased sales of the GE
products.
The Egoli gas project to convert Sasol gas to natural gas, continues with
completion expected August 2005. Nu-World is the proud supplier of gas
appliances for the conversion process. The future expansion of the gas supply
grid will bring additional opportunities for the sale of gas appliances. Natural
gas is becoming increasingly important as a lower cost alternative to rising
electricity costs.
MANPOWER AND SOCIAL RESPONSIBILITY
The Nu-World group of companies employs close to 1 000 people on three
continents. Nu-World remains committed to creating an environment where all of
our employees worldwide can develop to their fullest potential. The Nu-World
health clinic serves to provide occupational health and safety and to focus on
HIV/Aids awareness programs, counselling, testing and supportive medical
assistance. The appointed B.E.E. subcommittee is engaged in discussions with
potential partners. The group is actively supportive of the responsibility of
employment equity and continues to empower employees of colour. The group is
committed to comply with environmental regulations.
PROSPECTS
The group has achieved growth for 15 consecutive interim periods - across the
board, in turnover, operating income, attributable income and headline earnings
per share.
The Reserve Bank"s April 14th unexpected cut in the South African repo rate by
half a percentage point to 7,0%, the lowest nominal interest rate in 2 decades,
bodes well for consumer spending. The outlook for inflation remains favourable.
The Bureau for Economic Research, University of Stellenbosch latest research
indicates a significant decline in consumer inflation expectations. Domestic
expenditure continues to be robust with growth in real gross domestic
expenditure averaging 6,5% during 2004.
The continuing strong growth in private sector consumption continues to be
sustained by low interest rates, higher asset prices and increased real
disposable income. It is expected that these structural forces will support
levels of consumer confidence and will underpin sustained growth in the economy
and for our group, albeit at a slower pace, for the remainder of the financial
year.
SUBSEQUENT EVENTS
No events material to the understanding of the report have occurred in the
periods between the period-end and the date of this report.
On behalf of the board of directors
M.S. Goldberg B.H. Haikney Sandton
Executive Chairman Company Secretary 4 May 2005
Administration
Registration number 1968/002490/06
(Incorporated in the Republic of South Africa)
JSE share code: NWL
ISIN code: ZAE000005070
Registered office
35 3rd Street, Wynberg, Sandton, 2199
Republic of South Africa
Tel +27 (11) 321 2111
Fax +27 (11) 440 9920
Transfer secretaries
Computershare Investor Services 2005 (Pty) Limited
70 Marshall Street, Johannesburg, 2001
Company secretary
B.H. Haikney
Auditors
Tuffias Sandberg KSi
Joint sponsors
Nedbank Capital; Sasfin Corporate Finance,
a division of Sasfin Bank Limited (Lead)
Directors M.S. Goldberg (Chairman), J.A. Goldberg (Chief Executive), G.R. Hindle
(Financial Director)
Non-executive DirectorJ.M. Judin
Independent Non-executive DirectorD. Piaraywww.nuworld.co.za
Date: 05/05/2005 05:15:26 PM Supplied by www.sharenet.co.za
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